Expert says Austar offer is fair

The absence of a ruling from the Australian Competition and Consumer Commission has not stopped regional pay television company
Austar United Communications
from releasing the scheme booklet for its $1.93 billion takeover by Foxtel.

Austar received permission from the Federal Court to release the 311-page booklet. The scheme booklet includes an independent expert’s report from Grant Samuel valuing Austar at between $1.23 and $1.40 a share.

Foxtel’s offer of $1.52 a share represents a 17.9 per cent premium to Austar’s average share price in the three months before the bid was unveiled on May 25.

Austar shares slipped 1 per cent to $1.20 as investors remained uncertain about the completion of the deal.

Austar’s largest shareholder, American media giant Liberty Global, which owns 54.2 per cent, supports the offer from Foxtel and its shareholders
Telstra
,
News Corp
and
Consolidated Media Holdings
. Austar’s minority shareholders will vote on the offer on February 17.

Last week, the ACCC delayed an announcement on the fate of the deal after Foxtel asked for more time to argue its case. The regulator has not set a new date for releasing its decision. Foxtel was understood to be negotiating with the ACCC over a series of undertakings.

A statement from Austar said that if approvals from the ACCC and the Foreign Investment Review Board were not received before February 3, the February 17 meeting would be postponed.

A statement of issues from the ACCC on July 22 said its preliminary view was that the merger would result in a “substantial lessening" of competition in the pay TV, TV content and telecommunications sectors.

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Austar’s barrister, Peter Wood, SC, told the court there was “a possibility" the February 17 meeting would be postponed.

A new subsidiary of Liberty Global would buy out Austar’s minority shareholders for $1.52 a share and then sell the company to Foxtel, also at $1.52 a share.

The Grant Samuel report said the $1.52 a share offer implied a multiple of more than nine times Austar’s expected 2012 earnings before interest, tax, depreciation and amortisation of $254.1 million, which was based on brokers’ forecasts.

Overseas pay TV companies trade at multiples of between 5.3 and 9.3 times earnings.

Recent pay TV transactions have been struck at multiples of 5.6 times earnings in the sale of US company RCN Corp in March 2010 up to 15.2 times in the sale of European company Sogecable in December 2007.

If the Austar-Foxtel merger falls over, Foxtel will receive a “reimbursement fee" of up to $19.3 million.